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Should a student open a CC?


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I know what Dave R would say.  What is the opinion on Creditboards?   


Would the Discover It student cash back card be a decent credit starter/ stepping stone card to get a credit history initiated?    Thoughts? 

 

More info...

Three of our kids are  headed off/back to college.  Frosh, soph and a senior.

Each has no credit history whatsoever.  No student loans.  No debt of any kind.  

All school costs are covered by scholarships, including R&B, books, etc and each kid has a bit saved from their job. 

They are responsible kids from a very frugal upbringing (out of necessity).  Each seems staunchly debt averse.  Only one of the three likes to spend a little, but she also LOVES to work, is very driven, and lately is reading up on FIRE.  I would consider each of them savers. 

My oldest DD never app'd for a CC in college.  Now she has no credit history at 27 and sort of regrets it.   On the positive side, she didn't dig a hole or get in too deep.

 

 

 

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1 hour ago, Debtsuccinylcholine said:

I'll try a different approach...

At what point should a young person start establishing credit?   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as soon as possible. Remember there are some FACTA restrictions for college students but I see no reason responsible adults shouldn't open credit cards since credit cards are the safest way to buy things in person and on the internets.

 

They may want to try non-student cards first and find cards that offer them the rewards and benefits that fit their spending patterns.

 

and there is nothing axiomatic that having credit cards leads to digging a hole especially if you're there to help guide them into the habit of PIF.

 

Have you added them as AU on your cards?

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My kids all opened charge accounts with the local credit union before heading off to school.  

 

For example, my oldest opened a card, used it for a few expenses every month, and put the card on autopay.  When he graduated, he already had 4 years of good credit history.  

 

On top of that, his junior year he and some friends rented an apartment and had some utility bills.  So when he got his first job and was looking to buy a car, his credit was great.  

 

 

The problems came about because credit cards companies were pushing cards onto students like crack cocaine.  Quite a few students graduated with accounts in arrears, so they started out life after graduation with bad credit and extra debts.  

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As soon as possible after the age of 18.

 

I will say though there is no point in building up a credit file with AU accounts for minors. I've seen some people post about that on here in the past, getting a credit file established at a super young age, and you get the same benefit from adding an AU to someone's credit file today as you would have if you added it 10 years ago.  It also makes them more susceptible to fraud since there is an active credit file.

 

That last part was for others reading this, not for your case.

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Plenty of kids are responsible enough to handle the card.  Whether THIS kid would be is not something any of us can answer.  If they listen to the snake-oil salesman, they won't ever have any meaningful access to credit.  If they are careful in screening what they apply for and properly nurture the account, then they should be rewarded by the time they are finishing college...

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15 hours ago, mendelssohn said:

As soon as possible after the age of 18.

 

I will say though there is no point in building up a credit file with AU accounts for minors. I've seen some people post about that on here in the past, getting a credit file established at a super young age, and you get the same benefit from adding an AU to someone's credit file today as you would have if you added it 10 years ago.  It also makes them more susceptible to fraud since there is an active credit file.

 

That last part was for others reading this, not for your case.

 

Even though you have accounts reporting when you are under 18, that data is suppressed and not released until you hit 18.  So I'm not sure how that makes them susceptible to fraud.

 

Things might have changed a bit with AU account reporting for some credit card issuers.  Most all of the AU trade-ins on my wife's and my son's credit reports show the age as when I first opened the account, but there are one or two oddballs.  A 10-year old USAA account shows up on their reports as dated only a year -- when I added them.  There's one other like that, too, but I don't remember which bank.  

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On 8/18/2020 at 10:32 AM, BrokeBob said:

My kids all opened charge accounts with the local credit union before heading off to school.  

 

For example, my oldest opened a card, used it for a few expenses every month, and put the card on autopay.  When he graduated, he already had 4 years of good credit history.  

 

On top of that, his junior year he and some friends rented an apartment and had some utility bills.  So when he got his first job and was looking to buy a car, his credit was great.  

 

 

The problems came about because credit cards companies were pushing cards onto students like crack cocaine.  Quite a few students graduated with accounts in arrears, so they started out life after graduation with bad credit and extra debts.  

 

I went to college in the 90s, and I do remember the credit card reps everywhere. It was so different than today, of course. And no, I never applied for a card on campus. But one of my friends got a T-shirt for applying. Seriously! So that's where the basic rap comes from, and it is truly deserved. 

 

But, I did get my first credit card at 19, with the bank where I had my checking and savings accounts at that time. So I second BrokeBob's idea about getting a card where they bank now (bank or CU), if there's provable income. At the time, I had a summer job, so I could include that income, and the bank knew I was truthful since I deposited my paycheck there. (No direct deposit,  gasp!) 

 

 It may not have the flashiest rewards, or the biggest credit line, but it's a good start with an institution that already has a relationship going. And yes, I still have that no annual-fee card, and the CL grew quite a bit over the last 20+ years. 

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Yes. I had my first credit card at 19, and several more at about the same time. If you know you're going to run up the balance and not pay, then don't get one. Otherwise, if you just buy pencils and immediately pay them off, you're on your way to a very good credit score. It just takes time.

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On 8/20/2020 at 5:18 AM, legaleagle2012 said:

Nowhere in this thread is the critical question posed ..... does Junior have a job? If not, Daddy will be making the payments, which in reality does not establish that Junior is a responsible person.

But to the credit agencies, it looks like Junior is a responsible person.  

 

My oldest didn't have jobs during college throughout college.  Sometimes he had some  summer jobs, but that was about it.  The money he used to pay his credit cards was from parents and grandparents.

 

The point was, he paid his bills on time every month during the 4 years he was in college.  That is what the credit agencies look for.  They don't look at where you got the money, they look at whether you can pay your bills.

 

Hey, if Junior racks up huge credit card bills in his mid 20s, then pays it off, it doesn't matter to the CRAs whether he paid it off with his own money, or with money from his parents.  All they care about is he paid it off.  

 

The fact of the matter is, there are advantages to one's parents having money, and that includes getting bailed out.  The person whose parents bail them out is a significantly lower risk than the person who pays his own way, no matter what.  That fact makes the person whose parents bail them out a bigger target for predatory lenders, but that's not the concern of the CRAs.  

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